Anderson Corp. v. Blanch

• Decision Date: 09 December 1959
• Citation: 340 Mass. 43,162 N.E.2d 825
• Parties: ANDERSON CORPORATION v. S. Malcolm BLANCH et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 825

162 N.E.2d 825

340 Mass. 43

ANDERSON CORPORATION v. S. Malcolm BLANCH et al.

Supreme Judicial Court of Massachusetts, Worcester.

Argued Sept. 22, 1959.

Decided Dec. 9, 1959.

Alfred N. Whiting, Worcester, for plaintiff.

Francis H. George, Worcester, for defendant Blanch.

Seward B. Brewster, Worcester, for defendants Nelson and another.

Before WILKINS, C. J., and RONAN, COUNIHAN, WHITTEMORE, and CUTTER, JJ.

WILKINS, Chief Justice.

The plaintiff is a manufacturer of wire brushes in Worcester. The defendant Blanch was for twenty-five years a stockholder, director, treasurer, and employee of the plaintiff, and is now a stockholder in the defendant Dersal Corporation. The defendant Nelson was an auditor and accountant of the plaintiff from 1935 to 1955 and an employee from November, 1955, to February, 1956. Dersal was incorporated in 1956 in circumstances later described. The defendant A. Adrian Anderson (not served with process), a resident of the State of New York, is its sales manager. This bill in equity seeks to recover salary paid Blanch by the plaintiff; damages for breach of his contract of employment; damages for wire ordered by him in bad faith for the plaintiff's account; an injunction against Dersal's soliciting the plaintiff's customers; an injunction against Dersal's soliciting the plaintiff's customers; an injunction against Dersal's using machinery or processes developed or designed by Blanch while an employee of the plaintiff; damages from Dersal for services rendered Dersal by Blanch while in the plaintiff's employ; and an accounting for Dersal's profits.

The case was referred to a master, who filed a report, which, after the sustaining of four exceptions of Blanch and Dersal, was confirmed by an interlocutory decree. A final decree was entered awarding the plaintiff $1,909.59 in damages against Blanch as to the wire, awarding the plaintiff $1 in damages against Blanch for breach of the contract of employment, and dismissing the bill against the other defendants. The plaintiff appealed from both decrees.

The plaintiff was incorporated in 1928 to engage in the wire brush manufacturing business previously carried on in Worcester by Blanch. The incorporators were Blanch, George Anderson (no relation of A. Adrian Anderson), and one Quist, each holding two hundred fifty shares. They were the directors. Anderson was president and sales manager, and Blanch treasurer and clerk. Blanch ran the office and the plant, signed checks, negotiated contracts, purchased supplies, hired and discharged employees, took charge of production and shipping, designed tools and dies, and developed machines and methods of production, most of which were copied from other manufacturers. The business prospered. After the war the sales force was increased. In 1953, Brent Anderson, son of George, became assistant sales manager, and in January, 1954, was elected vice-president. About this time Quist died, and his stock was acquired by the Andersons and Blanch 'in equal proportions.' George Anderson died in June, 1954. On July 1, 1954, Brent and his mother obtained an option to purchase the capital stock of Blanch, who was approaching eighty years of age. On October 17, 1955, a contract was made to employ Blanch until December 31, 1957, at $15,600 annually, which was the largest salary paid by the plaintiff. As a result of growing friction between Brent and Blanch, the Andersons exercised their option, and the transfer of Blanch's half interest was completed on October 17, 1955.

The exercise of the opinion came as a shock to Blanch, and his attitude toward the business underwent a change. He and Nelson spent a great deal of time together outside of business hours. He began to take longer lunch hours, usually with Nelson, and ceased to come in on Saturdays. He did not neglect his duties as plant manager but continued to perform them for the most part in the same manner as previously. In October, 1955, Blanch and Nelson conceived the idea of starting a new business, and decided in favor of the wire brush business. It was necessary to find someone to take over sales, preferably one who could contribute capital. As a result A. Adrian Anderson, a friend of Nelson from New York, became associated in the new corporation, which was organized in February, 1956. Officers elected were A. Adrian Anderson president, and Nelson clerk and treasurer. There were four directors, A. Adrian Anderson, Nelson, Anderson's wife, and one White. Nelson has since resigned as an officer and director.

Officers of the plaintiff heard about the formation of Dersal and the connection with it of Blanch and Nelson in late February or early March. At a meeting of the plaintiff's stockholders on April 26, 1956, the first order of business was the election of treasurer. Before this was done, Blanch denied backing Dersal or knowing what it would manufacture, and finally declined to say anything until he consulted his attorney. He was told that he would not be relected and was no longer welcome at the plant. He left the meeting, and has never since entered the plaintiff's premises. He was not relected treasurer or chairman or a member of the board of directors.

Following the exercise of the option Blanch followed a line of conduct not in harmony with the plaintiff's best interests. This conduct included planning the organization of, and participation in the formation of, Dersal; preparation of plans and designs for products to be manufactured by Dersal; helping Dersal to obtain manufacturing space and equipment; purchasing unneeded wire for the plaintiff for the purpose of injuring it; and concealing from the plaintiff such activities, including the denial of those activities when charged with them.

The plaintiff was warranted in discharging Blanch. His connection with Dersal was not compatible with his position with the plaintiff, and was a breach of contract. He did, however, render valuable services after the sale of his stock. The plaintiff 'has been put to expense and suffered a loss as a result of Blanch's improper conduct and breach of contract.' 'Blanch's heart was not in his work and the elements of loyalty, coperation, and interest were lacking, and their counterparts of disloyalty, secrecy, and hostility were present. This reduced the value of Blanch's services during this period.'

The sums which the plaintiff seeks to recover as salary payments from Blanch total $9,400. These were made between October 20, 1995, when his allegedly disloyal acts began, ¹ and April 26, 1956, when he was discharged. The master found that the services actually performed were worth but $7,125, but that '[t]his does not take into account damages * * * from Blanch's breach of contract.' Those are $2,375 in addition to damages for loss on the wire, which are $1,909.59.

The master goes on to state: 'The question of what is the proper rule of damages to apply against Blanch is mainly one of law and not of fact. If the rule to apply is based upon the contract between the plaintiff and Blanch and the damages are those sustained by the former from the latter's breach of that contract, Anderson Corporation is entitled to recover from Blanch $2,375 plus $1,909.59 or a total of $4,284.59. If, however, that rule is not applicable * * * Anderson Corporation would be entitled to recover the difference between $9,400 and the net value of Blanch's services to the plaintiff. This net value was $2,840.41 and the amount Anderson Corporation would be entitled to recover would be $6,559.59.'

1. The question of damages involves consideration of the effect of the sustaining of the exceptions to the master's report. The first two objections (which became exceptions ²) filed by the defendants Blanch and Dersal were as follows: 1. 'That the subsidiary facts set forth in the master's report do not, as a matter of law, constitute an adequate basis for the master's finding that Blanch's services to Anderson Corporation were worth only $7,125 after October 20, 1955, rather than $9,400, which was the contract price for such services, in that there was no evidence of value of such services other than the contract price.' 2. 'That there is no evidence to justify the master's ultimate finding that Anderson Corporation was damaged as a result of Blanch's breach of contract in the amount of $2,375.'

These objections, which seek to raise the question whether the unreported evidence was sufficient in law to support findings of fact, concern something which does not appear upon the face of the report. See Israel v. Sommer, 292 Mass. 113, 119-120, 197 N.E. 442; Lowell Gas Co. v. Department of Pub. Util., 324 Mass. 80, 90, 84 N.E.2d 811. Reports of evidence or summaries of evidence would be recessary to enable consideration of these matters. See Minot v. Minot, 319 Mass. 253, 258-259, 66 N.E.2d 5; Morrison v. Morrison, 320 Mass. 133, 135, 68 N.E.2d 17; Royal Tool & Gauge Corp. v. Clerk of Courts for the County of Hampden, 326 Mass. 390, 391, 94 N.E.2d 781. The defendants' briefs are filled with references to what was the evidence or to the absence of evidence on certain points. Of course, these arguments are not open. No evidence is reported. The case is to be judged upon the findings, as one of those briefs itself states, citing Kyle v. Reynolds, 211 Mass. 110, 112, 97 N.E. 614, and Dodge v. Anna Jaques Hosp., 301 Mass. 431, 435, 17 N.E.2d 308.

The master's attempt to report summaries of evidence applicable to each objection was contrary to Rule 90 of the Superior Court (1954). Not only was there no compliance with Rule 90 by 'written request presented with the objection' (Watkins v. Simplex Time Recorder Co., 316 Mass. 217, 222, 55 N.E.2d 203), but there is no showing that there was 'a stenographer selected or approved by the master before any evidence was introduced.' New England Factors, Inc. v. Genstil, 322 Mass. 36, 44, 76 N.E.2d 151, 156; Patterson v. Simonds, 324 Mass....